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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission file number 001-37605

 

LM FUNDING AMERICA, INC.

(Exact name of Registrant as specified in its charter)

 

Delaware

47-3844457

(State or other jurisdiction of

incorporation or organization)

(I.R.S. employer

identification no.)

 

 

1200 West Platt Street

Suite 100

Tampa, FL

33606

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: 813-222-8996

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:

Trading symbol

Name of each exchange on which registered

Common Stock par value $0.001 per share

LMFA

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The registrant had 14,651,883 shares of Common Stock, par value $0.001 per share, outstanding as of November 8, 2023.

 

 

 

 


 

LM FUNDING AMERICA, INC.

TABLE OF CONTENTS

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements

3

 

 

 

LM Funding America, Inc. and Subsidiaries Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022

3

 

 

 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

4

 

 

 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited)

5

 

 

 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)

6

Notes to Unaudited Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

 

 

 

Item 4.

Controls and Procedures

35

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

37

 

 

 

Item 1A.

Risk Factors

37

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

 

 

 

Item 3.

Defaults Upon Senior Securities

38

 

 

 

Item 4.

Mine Safety Disclosures

38

 

 

 

Item 5.

Other Information

38

 

 

 

Item 6.

Exhibits

39

 

 

SIGNATURES

40

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

LM Funding America, Inc. and Subsidiaries Consolidated Balance Sheets

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash

 

$

469,007

 

 

$

4,238,006

 

Digital Assets (Note 2)

 

 

2,256,500

 

 

 

888,026

 

Finance receivables

 

 

21,558

 

 

 

26,802

 

Marketable securities (Note 5)

 

 

198,094

 

 

 

4,290

 

Notes receivable from Seastar Medical Holding Corporation (Note 5)

 

 

2,277,012

 

 

 

3,807,749

 

Less: Allowance for credit loss reserve on notes receivable from Seastar Medical Holding Corporation (Note 5)

 

 

(22,344

)

 

 

-

 

Notes receivable from Seastar Medical Holding Corporation, net

 

 

2,254,668

 

 

 

3,807,749

 

Prepaid expenses and other assets

 

 

1,463,094

 

 

 

1,233,322

 

Income tax receivable

 

 

293,466

 

 

 

293,466

 

Current assets

 

 

6,956,387

 

 

 

10,491,661

 

 

 

 

 

 

 

 

Fixed assets, net (Note 3)

 

 

25,917,390

 

 

 

27,192,317

 

Deposits on mining equipment (Note 4)

 

 

282,233

 

 

 

525,219

 

Hosting services deposits (Note 4)

 

 

2,218,452

 

 

 

2,200,452

 

Real estate assets owned

 

 

80,057

 

 

 

80,057

 

Long-term investments - debt security (Note 5)

 

 

-

 

 

 

2,402,542

 

Less: Allowance for losses on debt security (Note 5)

 

 

-

 

 

 

(1,052,542

)

Long-term investments - debt security, net (Note 5)

 

 

-

 

 

 

1,350,000

 

Long-term investments - equity securities (Note 5)

 

 

72,815

 

 

 

464,778

 

Investment in Seastar Medical Holding Corporation (Note 5)

 

 

683,100

 

 

 

10,608,750

 

Symbiont intangible assets, net (Note 11)

 

 

2,000,000

 

 

 

-

 

Operating lease - right of use assets (Note 8)

 

 

214,574

 

 

 

265,658

 

Other assets

 

 

10,726

 

 

 

10,726

 

Long-term assets

 

 

31,479,347

 

 

 

42,697,957

 

Total assets

 

$

38,435,734

 

 

$

53,189,618

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

2,253,311

 

 

 

1,570,906

 

Note payable - short-term (Note 6)

 

 

63,208

 

 

 

475,775

 

Due to related parties (Note 7)

 

 

44,398

 

 

 

75,488

 

Current portion of lease liability (Note 8)

 

 

106,689

 

 

 

90,823

 

Total current liabilities

 

 

2,467,606

 

 

 

2,212,992

 

 

 

 

 

 

 

 

Lease liability - net of current portion (Note 8)

 

 

114,855

 

 

 

179,397

 

Long-term liabilities

 

 

114,855

 

 

 

179,397

 

Total liabilities

 

 

2,582,461

 

 

 

2,392,389

 

 

 

 

 

 

 

 

Stockholders' equity (Note 9)

 

 

 

 

 

 

Preferred stock, par value $.001; 150,000,000 shares authorized; no shares issued and outstanding as of September 30, 2023 and December 31, 2022

 

 

-

 

 

 

-

 

Common stock, par value $.001; 350,000,000 shares authorized; 14,651,883 shares issued and outstanding as of September 30, 2023 and 13,091,883 as of December 31, 2022

 

 

14,652

 

 

 

13,092

 

Additional paid-in capital

 

 

94,722,633

 

 

 

92,195,341

 

Accumulated deficit

 

 

(57,369,694

)

 

 

(43,017,207

)

Total LM Funding America stockholders' equity

 

 

37,367,591

 

 

 

49,191,226

 

   Non-controlling interest

 

 

(1,514,318

)

 

 

1,606,003

 

Total stockholders' equity

 

 

35,853,273

 

 

 

50,797,229

 

Total liabilities and stockholders’ equity

 

$

38,435,734

 

 

$

53,189,618

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3


 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Digital mining revenues

 

$

3,283,473

 

 

$

42,157

 

 

$

8,342,646

 

 

$

42,157

 

Specialty finance revenue

 

 

101,535

 

 

 

104,835

 

 

 

474,544

 

 

 

450,920

 

Rental revenue

 

 

34,500

 

 

 

40,788

 

 

 

111,486

 

 

 

120,240

 

           Total revenues

 

 

3,419,508

 

 

 

187,780

 

 

 

8,928,676

 

 

 

613,317

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Digital mining cost of revenues (exclusive of depreciation and amortization shown below)

 

 

2,708,672

 

 

 

38,960

 

 

 

6,738,170

 

 

 

38,960

 

Staff costs and payroll

 

 

1,340,665

 

 

 

4,297,540

 

 

 

4,736,940

 

 

 

12,886,432

 

Professional fees

 

 

419,173

 

 

 

714,730

 

 

 

1,228,503

 

 

 

2,520,981

 

Settlement costs with associations

 

 

-

 

 

 

-

 

 

 

10,000

 

 

 

160

 

Selling, general and administrative

 

 

201,151

 

 

 

209,328

 

 

 

683,174

 

 

 

446,519

 

Real estate management and disposal

 

 

26,453

 

 

 

22,558

 

 

 

127,611

 

 

 

76,453

 

Depreciation and amortization

 

 

1,516,873

 

 

 

38,617

 

 

 

3,487,866

 

 

 

43,718

 

Collection costs

 

 

8,098

 

 

 

5,037

 

 

 

17,533

 

 

 

(6,689

)

Impairment loss on mined digital assets

 

 

383,497

 

 

 

870

 

 

 

822,650

 

 

 

870

 

Realized gain on sale of mined digital assets

 

 

(261,191

)

 

 

-

 

 

 

(1,331,982

)

 

 

-

 

Other operating costs

 

 

246,536

 

 

 

124,405

 

 

 

704,390

 

 

 

274,298

 

Total operating costs and expenses

 

 

6,589,927

 

 

 

5,452,045

 

 

 

17,224,855

 

 

 

16,281,702

 

            Operating loss

 

 

(3,170,419

)

 

 

(5,264,265

)

 

 

(8,296,179

)

 

 

(15,668,385

)

Realized gain (loss) on securities

 

 

1,788

 

 

 

-

 

 

 

1,788

 

 

 

(349,920

)

Realized gain on convertible debt securities

 

 

-

 

 

 

-

 

 

 

-

 

 

 

287,778

 

Unrealized gain (loss) on marketable securities

 

 

2,058

 

 

 

(13,000

)

 

 

6,436

 

 

 

(36,900

)

Impairment loss on hosting deposits

 

 

-

 

 

 

-

 

 

 

(36,691

)

 

 

-

 

Impairment loss on Symbiont assets

 

 

(750,678

)

 

 

-

 

 

 

(750,678

)

 

 

-

 

Unrealized gain (loss) on investment and equity securities

 

 

(778,078

)

 

 

(194,174

)

 

 

(10,317,613

)

 

 

11,034,828

 

Impairment loss on digital assets

 

 

-

 

 

 

(25,764

)

 

 

-

 

 

 

(403,471

)

Realized gain on sale of purchased digital assets

 

 

-

 

 

 

-

 

 

 

1,917

 

 

 

-

 

Digital assets other income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,658

 

Other income - coupon sales

 

 

10,160

 

 

 

-

 

 

 

639,472

 

 

 

-

 

Credit loss on Seastar Medical Holding Corporation notes receivable

 

 

(22,344

)

 

 

-

 

 

 

(22,344

)

 

 

-

 

Gain on adjustment of note receivable allowance

 

 

-

 

 

 

-

 

 

 

1,052,543

 

 

 

-

 

Other income - finance revenue

 

 

-

 

 

 

-

 

 

 

37,660

 

 

 

-

 

Dividend income

 

 

-

 

 

 

1,125

 

 

 

-

 

 

 

3,875

 

Interest income

 

 

39,657

 

 

 

85,602

 

 

 

210,881

 

 

 

264,947

 

Loss before income taxes

 

 

(4,667,856

)

 

 

(5,410,476

)

 

 

(17,472,808

)

 

 

(4,861,590

)

Income tax expense

 

 

-

 

 

 

(1,311,678

)

 

 

-

 

 

 

(1,311,678

)

Net Loss

 

$

(4,667,856

)

 

$

(6,722,154

)

 

$

(17,472,808

)

 

$

(6,173,268

)

Less: loss (income) attributable to non-controlling interest

 

 

250,880

 

 

 

59,298

 

 

 

3,120,321

 

 

 

(3,373,299

)

Net loss attributable to LM Funding America Inc.

 

$

(4,416,976

)

 

$

(6,662,856

)

 

$

(14,352,487

)

 

$

(9,546,567

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic loss per common share

 

$

(0.33

)

 

$

(0.51

)

 

$

(1.08

)

 

$

(0.73

)

Diluted loss per common share

 

$

(0.33

)

 

$

(0.51

)

 

$

(1.08

)

 

$

(0.73

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

13,480,470

 

 

 

13,091,883

 

 

 

13,237,121

 

 

 

13,081,591

 

Diluted

 

 

13,480,470

 

 

 

13,091,883

 

 

 

13,237,121

 

 

 

13,081,591

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4


 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Cash Flows

(unaudited)

 

Nine Months ended September 30,

 

 

2023

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(17,472,808

)

 

$

(6,173,268

)

Adjustments to reconcile net income (loss) to net cash used in operating activities

 

 

 

 

 

 

Depreciation and amortization

 

 

3,487,866

 

 

 

43,718

 

Noncash lease expense

 

 

70,545

 

 

 

71,288

 

Stock compensation

 

 

917,057

 

 

 

988,498

 

Stock option expense

 

 

1,611,795

 

 

 

9,956,219

 

Accrued investment income

 

 

(130,990

)

 

 

(259,867

)

Impairment loss on digital assets

 

 

822,650

 

 

 

404,341

 

Impairment loss on hosting deposits

 

 

36,691

 

 

 

-

 

Impairment loss on Symbiont assets

 

 

750,678

 

 

 

-

 

Unrealized loss (gain) on marketable securities

 

 

(6,436

)

 

 

36,900

 

Unrealized loss (gain) on investment and equity securities

 

 

10,317,613

 

 

 

(11,034,828

)

Realized loss (gain) on securities

 

 

(1,788

)

 

 

349,920

 

Realized gain on convertible note receivable

 

 

-

 

 

 

(287,778

)

Realized gain on sale of digital assets

 

 

(1,333,899

)

 

 

-

 

Proceeds from securities

 

 

554,036

 

 

 

2,565,893

 

Convertible debt and interest converted into marketable securities

 

 

-

 

 

 

844,882

 

Investments in marketable securities

 

 

(739,616

)

 

 

(844,882

)

Credit loss on Seastar Medical Holding Corporation notes receivable

 

 

22,344

 

 

 

-

 

Reversal of allowance loss on debt security

 

 

(1,052,543

)

 

 

-

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(123,221

)

 

 

807,352

 

Hosting deposits

 

 

(54,691

)

 

 

-

 

Repayments to related party

 

 

(31,090

)

 

 

(45,605

)

Accounts payable and accrued expenses

 

 

682,405

 

 

 

172,723

 

Mining of digital assets

 

 

(8,352,805

)

 

 

(42,157

)

Proceeds from sale of digital assets

 

 

7,487,058

 

 

 

-

 

Lease liability payments

 

 

(70,563

)

 

 

(75,574

)

Deferred taxes and taxes payable

 

 

-

 

 

 

841,678

 

Net cash used in operating activities

 

 

(2,609,712

)

 

 

(1,680,547

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Net collections of finance receivables - original product

 

 

(8,765

)

 

 

19,049

 

Net collections of finance receivables - special product

 

 

14,009

 

 

 

(11,565

)

Capital expenditures

 

 

(1,913,303

)

 

 

(15,380

)

Investment in note receivable

 

 

(100,000

)

 

 

(350,000

)

Investment in note receivable - related party

 

 

-

 

 

 

(2,785,000

)

Collection of note receivable

 

 

1,761,727

 

 

 

-

 

Investment in digital assets

 

 

(35,157

)

 

 

(978,441

)

Proceeds from sale of purchased digital assets

 

 

43,678

 

 

 

-

 

Symbiont asset acquisition

 

 

(402,359

)

 

 

-

 

Deposits for mining equipment

 

 

-

 

 

 

(16,467,402

)

Net cash used in investing activities

 

 

(640,170

)

 

 

(20,588,739

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Insurance financing repayments

 

 

(499,453

)

 

 

(114,688

)

Insurance financing

 

 

86,886

 

 

 

-

 

Issue costs from the issuance of common stock

 

 

(106,550

)

 

 

-

 

Net cash used in financing activities

 

 

(519,117

)

 

 

(114,688

)

NET DECREASE IN CASH

 

 

(3,768,999

)

 

 

(22,383,974

)

CASH - BEGINNING OF PERIOD

 

 

4,238,006

 

 

 

32,559,185

 

CASH - END OF PERIOD

 

$

469,007

 

 

$

10,175,211

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

ROU assets and operating lease obligation recognized

 

$

21,887

 

 

$

300,787

 

Reclassification of mining equipment deposit to fixed assets, net

 

$

1,177,226

 

 

$

21,986,382

 

SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

 

$

-

 

Cash paid for taxes

 

$

-

 

 

$

470,000

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5


 

LM Funding America, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2023 and 2022

(unaudited)

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional paid-in capital

 

 

Accumulated Deficit

 

 

Non-Controlling Interest

 

 

Total Equity

 

     Balance - December 31, 2021

 

 

13,017,943

 

 

$

13,018

 

 

$

74,525,106

 

 

$

(13,777,006

)

 

$

249,089

 

 

$

61,010,207

 

Stock issued for services

 

 

73,940

 

 

 

74

 

 

 

(74

)

 

 

-

 

 

 

-

 

 

 

-

 

Stock compensation

 

 

-

 

 

 

-

 

 

 

329,500

 

 

 

-

 

 

 

-

 

 

 

329,500

 

Stock option expense

 

 

-

 

 

 

-

 

 

 

3,318,737

 

 

 

-

 

 

 

-

 

 

 

3,318,737

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,728,051

)

 

 

(291,200

)

 

 

(6,019,251

)

Balance - March 31, 2022

 

 

13,091,883

 

 

$